Many middle-class Americans were already living paycheck to paycheck before COVID-19. What happens to them now?

Big Mama’s Kitchen and Catering, a soul food restaurant in Omaha, Nebraska, had been struggling for a few years. But in January, after making the move to a new location with a fully revamped kitchen, things started picking up.

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“We were doing really good, and we were on course to have the best quarter that we’ve ever had,” says owner Gladys Harrison. “Then on March 8, I noticed the sales started to decline.” Their business dropped further with each passing day, and a week later, they earned just $100—less than a tenth of their average on Sundays.

Harrison had no choice but to lay off her staff. To give employees one last paycheck, Harrison and her daughter continued working without pay until April 3. “For my people, this is their bread and butter,” she says. “This is how they pay their bills. It’s how they make their car payments. It’s how they buy diapers.”

“It is dire, and it is going to continue being really dire,” says Heidi Shierholz, a senior economist and director of policy at the Economic Policy Institute. “The loss of jobs amongst low-wage workers has gotten a lot of attention because those have been some of the hardest hit jobs out of the gate.” But the industries that have most visibly suffered losses don’t just employ workers from low-income households. The pandemic has also made clear that many middle-class Americans are just barely holding on. There are credit card bills and rent and student loans to pay off. Another recession could knock many right out of the middle class.

Who is middle class, anyway?

Between wage stagnation and ballooning student loan debt, the middle class hasn’t seen the gains that upper-income households have experienced in recent decades. Back in 1971, the share of Americans who were middle class was 61%. Now, just over half of Americans live in middle-income households, according to the Pew Research Center—though far more consider themselves as middle class. For many Americans, the cultural markers of the middle class, from job stability to home ownership, feel hard-won, if they’re within reach at all.

Even before the coronavirus hit, many Americans lived paycheck to paycheck and had little in the way of emergency funds. The personal savings rate had dropped to barely 8% of disposable income, and according to a recent Federal Reserve report, about 40% of Americans would struggle to cover an emergency expense of $400. And a Pew study conducted last month found that just 47% of Americans have enough saved to foot three months of expenses.

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This crisis stands to make all that worse: A recent report by Columbia University’s Center on Poverty and Social Policy found that if the unemployment rate hits 30% and hovers there, more than 21 million people could fall out of the middle class, reaching Great Depression-era poverty rates. And what little social mobility Americans had access to before will cease to exist. “The path to the middle class wasn’t that robust before,” Shierholz says. “But now, people will be getting knocked out of the middle class left and right.”

These days, the term “middle class” might be associated more with a feeling of precarity than any strict definition offered by economists, which helps explain the amorphous strata of Americans that self-identify as middle class. New York governor Andrew Cuomo recently called the coronavirus the “great equalizer.” But while the virus itself can impact anyone, the economic fallout from this pandemic has only deepened existing inequities.

It has laid bare the vulnerability of both low-income and middle-income workers, many of whom faced job instability and struggled to make rent payments long before coronavirus. Many of them have hourly jobs that can’t be performed remotely, and they may not have access to benefits like paid sick leave or a path to increasing their earnings. These workers are often the first to be let go in a crisis, as we’ve seen in the restaurant and hospitality industries, and they have less of a safety net in the event of unemployment. Many of them were already rent burdened: In 2018, nearly half of tenants in New York City were spending more than 30% of their income on rent, according to a report by the Citizens Budget Commission.

The virus has also disproportionately affected communities of color: More than 80% of hospitalized COVID-19 patients in Georgia have been black, and other Southern states have shown similar disparities in infection rates. Across New York City, death rates for black and Latinx populations have been significantly higher than for other racial and ethnic groups. These health disparities are the result of the systemic racism and housing discrimination that those communities have weathered for years. People of color are less likely to own their homes; they’re also more likely to work in service sector jobs and live in more densely populated areas, which increases their chances of contracting the virus. All this leaves middle class POC at a greater disadvantage during a period of upheaval.

Another reason the middle class is on rocky ground right now, Shierholz says, is because public sector positions, which include postal workers and bus drivers, are under attack. “Public sector jobs [have] traditionally been a real road to the middle class for many families, particularly black families,” she says. “Usually public sector jobs don’t get hit right off the bat in recessions. The public sector is able to kind of move money around until they have to start laying people off.” But in April, nearly a million workers were laid off from state and local jobs. “It’s just blowing my mind how quickly that has happened,” Shierholz says. “And that’s going to absolutely be just the beginning.”

The vulnerability of small businesses

Small business owners, too, are being left in the lurch. The CARES Act, the $2 trillion stimulus package signed in late March, promised relief to unemployed workers—who could receive $600 each week in addition to state unemployment benefits—and small business owners who applied for a piece of the $349 billion offered in loans by the Paycheck Protection Program (PPP).

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When Harrison eventually got a loan through the PPP, it enabled her to reopen her restaurant for takeout. “We were closed a month,” she says. “Had we not gotten that PPP money, I wouldn’t have had the ability to reopen.” But the PPP ran out of funds almost immediately, which means countless other business owners have yet to see a penny of stimulus cash. (Congress has since approved another $310 billion in small business loans.)

Larry Brehm owns a sporting goods store in Torrance, California, which he has overseen for more than 15 years. Brehm is the primary earner in his family and has two teenage sons. When California entered lockdown, his business dried up overnight. “We do well when Little League signups happen, when the soccer season starts, when tennis lessons happen,” he says. “We do very well in the summer when the beaches are open. Literally all of that has been stripped away.”

Like others in his situation, Brehm applied for a PPP loan. After months of waiting for a response, his loan was finally approved. “It’s in the final stages,” he says. “But it [has] taken way too long. I applied the first day they became available.” When he applied for business interruption insurance, he got denied. “In my eyes,” he says, “small businesses are being ignored.”

Meanwhile, larger companies that hardly qualify as small businesses have been awarded millions of dollars in PPP loans. (The loans were made available to companies with up to 500 employees, though certain loopholes allowed even companies with a higher headcount to apply.) A number of publicly traded companies and venture-backed startups have since returned their loans in response to public pressure. But that’s little solace to Brehm. “It was insulting to see that the Los Angeles Lakers got [$4.6 million],” he says, noting that the team returned the loan. “They shouldn’t have even applied for that.”

How the wealthy will fare

This crisis could also separate the true middle class from those who might fancy themselves middle class despite bank balances that belie the label. People in largely white collar jobs who have the ability to work remotely, many of whom might fall into that category, are now in a better financial position than many other Americans. They may face their own hurdles, of course—the balancing act of managing childcare with work responsibilities, or the very real threat of layoffs—but many are ensconced in their homes, sealed off from the exposure to the virus, and in a better position to acclimate to a new reality.

“I think of this little subset of people who are able to telework,” Shierholz says. “They have paid sick days. They have health insurance. They’re actually pretty set up to weather this well.” This crisis could push more employers to embrace remote work where possible. “I estimate that somewhere between half and two-thirds of the existing labor force should be able to do this, at least much of the time, but are not permitted to do so because of inertia and fear of malingering,” writes Isabel Sawhill, a senior fellow at the Brookings Institution. But in many middle class jobs—such as public sector roles in transportation—remote work just may not be an option.

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And remote work may not be a salve even for the families that do have the ability to safely work from home. As Shierholz notes, the divide between the richest Americans and the rest of the workforce is so gaping that even a family with an income that exceeds what 80% of Americans earn might struggle to make ends meet on a good day, let alone during a recession.

For now, people like Brehm are trying to remain optimistic. He has been able to negotiate delayed payments for rent and credit card bills, though that’s hardly more than a band-aid. “It’s just pushing things away,” he says. “It’s not fixing anything.” Even if he manages to keep his business afloat until social distancing restrictions ease up, there’s no guarantee he’ll earn enough to keep the doors open. “It’s not to say that people are going to just be lined up on the street trying to come in,” he says. “It’s too early to tell what I would do. I’m trying to keep positive. But bottom line: I’d work at Starbucks to support my family if I have to. I would never let my family not have something to eat.”

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About the author

Pavithra Mohan is an assistant editor for Fast Company Digital. Her writing has previously been featured in Gizmodo and Popular Science magazine.